Harold Simmons Just Lost $2 Billion On Valhi: Time To Buy?

Harold Simmons, the 81-year-old Dallas billionaire and leveraged buyout pioneer, had a lousy year. According to the latest Forbes list of richest Americans, Simmons lost $1.9 billion last year, largely due to a fall in Valhi (VHI) stock.

He’s still worth $7.1 billion. And is the stock fall a buying opportunity?

Valhi is a holding company for other companies. Those include Waste Control Specialists, which operates a hazardous waste facility in Texas; CompX (CIX), which makes components like gauges and locks; and Kronos (DRO) a chemical company that makes titanium dioxide, a white pigment used in everything from paint to sunscreen.

Many of these businesses are in regulated industries. Waste Control, for example, takes toxic waste from various states in remote West Texas. That may help explain why Simmons is a huge Republican backer. This is the guy who funded the Swift Boat attacks on 2004’s Democratic candidate, John Kerry.

But Valhi’s chemicals business is its main attraction. Last year that brought in 93% of sales. And thanks to a loss in the waste management business, it bought in more than Valhi’s total operating profits ($553 million for the chemicals business, $530.5 million overall).

VHI Net Income TTM Chart

VHI Net Income TTM data by YCharts

TiO2 sales in the second quarter dropped 16%. Valhi attributed that lower demand in Europe and export markets, plus fluctuations in currency rates. Higher raw materials costs didn’t help. That has helped push the stock down more than 41% so far this year.

VHI Chart

VHI data by YCharts

But revenue growth looks good.

VHI Revenue Growth Chart

VHI Revenue Growth data by YCharts

Its profit margin is rising.

VHI Profit Margin Chart

VHI Profit Margin data by YCharts

VHI Return on Invested Capital Chart

VHI Return on Invested Capital data by YCharts

But although it has gotten cheaper, and its earnings cost less than those of Dow, it’s not cheap compared to competitors like DuPont (DD) and Huntsman (HUN).

VHI PE Ratio Chart

VHI PE Ratio data by YCharts

And its dividend yield doesn’t entice, either.

VHI Dividend Yield Chart

VHI Dividend Yield data by YCharts

Simmons might have to lose another billion or so before this is a bargain.

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.



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